Understand 457 Retirement Plans

In the United States of America the so-called 457 retirement plans are
available to governmental and certain non-governmental employers.

The 457 Plans were established by the US federal government to allow
employees of sponsoring organizations to defer income taxation on
retirement savings into future years. The name refers to section 457 in
the US Internal Revenue Code.

Plans based on this section of the US Internal Revenue Code became generally known as 457 Retirement Plans.

In
short a 457 Plan is a tax advantaged deferred-compensation retirement
plan that permits you as an employee to have a portion of your salary
deducted from your paycheck and contributed to an account. Your employer
may also make contributions to this account.

The 457 plans
are very similar to the well known 401k retirement plans in the United
States of America. The major difference is that there is no 10% penalty
for withdrawal before the age of 59 years and six months. Withdrawals
are of course subject to ordinary income taxes.

Tax on your, as
well as your employer's, contributions plus the income earned on the
account is deferred until your retirement or until you draw against this
account.

The Internal Revenue Service sets a maximum amount you
can contribute annually to your 457 plan. The smart thing to do is to
contribute as much as you can within the limits allowed.

457 Plans
make provision for 'rollover' when you change your employer. That means
you can move your assets from your old 457 plan to your new 457 plan,
to an Individual Retirement Account, or to a 401k retirement plan.

You
decide how your money is invested inside your retirement plan. The
smart thing is to diversify your investment spread and to remain
cautious and conservative rather than aggressive.

Your retirement
plan is only one component of your comprehensive retirement plan. Do
consider a retirement income planner in your research and choose a
retirement calculator by visiting these pages on our Web site.

However,
you cannot rely on these tools entirely for your retirement planning
decisions. You'll need a qualified advisor for that.

457 Plans are
for state or local government employees in the United States of
America. For employees of private companies please refer to 401k
retirement plans. For employees of educational institutions, churches,
public hospitals and certain nonprofit organizations please refer to
403b retirement plans.